Sibal also accused the government of artificially creating a scarcity of spectrum by not putting it all up for auction to increase spectrum prices.Samanwaya Rautray | ET Bureau | May 04, 2016, 09:11 IST

NEW DELHI: Telecom companies, which have appealed in the Supreme Court against a High Court ruling upholding the regulatory body’s decision to slap call drop compensation charges on them, on Tuesday claimed that the 2G ruling mandating spectrum auction had virtually destroyed the sector and left them mired in debt.

They also claimed that their returns on investment was less than 1 per cent in all these years they have invested in the Indian market, contesting the government’s top law officer’s claims that they were walking off with huge profits but not investing enough in infrastructure leading to call drops and much harassment of consumers.

Their lead lawyer Kapil Sibal took the opportunity to again reiterate his zero-loss theory as opposed to the CAG’s estimated 70,000 cr loss caused to the exchequer from handing out spectrum to private telecom players for free.

“The 2G judgment has destroyed the sector. We will end up in the BIFR (where companies go for winding up). We are Rs 3,80,000 cr in debt,” he told Justices Kurian Joseph and R.F. Nariman.

“The principle laid down by the court -- of auction of every natural resource -- has destroyed the sector. They attacked me for speaking about zero-loss, but I spoke my mind. This principle will ruin the coal and the steel sector as well and destroy the substratum of the Indian economy. In coal sector those who won in auctions are now returning the blocks,” he said.

He claimed that the sector was not doing too well post the decision to auction spectrum.

“From Rs 1688 rupees we are now paying 45,000 cr for spectrum per operator. The TRAI did not tell this to the court. Who pays for this? How do I pay for it?”

He also accused the government of artificially creating a scarcity of spectrum by not putting it all up for auction to increase spectrum prices.

The TRAI, he charged, was misleading the court with wrong facts in a bid to prejudice it. Private telecom players in India cannot be compared with state-owned units in China which get spectrum for free. “Every time a call drops, the consumer suffers, but so do I. Why would we want a call to drop?”

He also argued that the Indian telecom market was very different from the market elsewhere in that India has the lowest tariffs in the world. The consumer has no capacity to pay, so 96 per cent of the consumers are pre-paid consumers.

Enumerating on the sector’s contribution to the economy, he said that the sector was the highest contributor in FDI and had contributed 500,000 million and had contributed Rs 70,000 cr per annum to the exchequer. It contributes 6% to the GDP and employs 2.2 lakh people directly and another 2 lakh indirectly.

Despite a debt of Rs 3,80,000 cr, the sector had the largest investment in the economy to the tune of Rs 80,000 crore. He also contested the AG’s claims that the telecom companies were not investing in cell phone towers while picking up more and more subscribers. “We have set up more than 2 lakh sites in the last 15months. In fact, one site is set up every three minutes,” he said.

He accused the regulatory body of washing its hands of the conducive atmosphere it was supposed to provide for telcos to flourish. “Their attitude is ‘I don’t care if you don’t get municipal permissions, I don’t care if you don’t have the right of way. We need revenues.’ This is not the way the government should be asking for money.”

This will only increase costs of the sector, he warned. “If this is the state of the sector, how are we running away with the profits? This is very unfair. What cartels? This is an industry which ought to flourish but is being run down. I have to pay back huge loans. The regulatory authority does not take note of this fact when it claims that I am making profits but not investing.”

The debt-equity ratio in all telecom companies is higher than before, though it has not reached alarming proportions yet, he argued.

“All the revenues from spectrum go into the consolidated fund of India to reduce fiscal deficit. Only 1800 people in this country declare income of above a crore. So you increase service tax. Money that is supposed to go to infrastructure -- laying down fibre optics networks – for the consumer doesn’t go into it. This is most unfortunate. Then you come here and talk about the consumer.”

He accused the courts of treating anything given to the private sector free as corruption. “This will affect education and hospitals. Who will set them up if land is so expensive?” On top of that, the government holds back spectrum and allots it at artificially created high prices and doesn’t even ensure contiguous spectrum for better optimization.

His arguments concluded the hearing on the challenge by telecom companies to a HC ruling upholding the charges at the rate of Rs one per dropped call subject to a cap of three calls.

NGOs and consumer activists also argued in court today in favour of the charges saying that any statutory mechanism doesn’t oust the right of the consumer to fair compensation. The court then reserved its judgement on the issue.

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